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Will Google's AI Investment in Beijing Bear Fruit?

Google products are largely banned in China. Can the search giant break that streak with artificial intelligence?

Alphabet Inc.(NASDAQ:GOOGL)(NASDAQ:GOOG) has a checkered history when it comes to China. In 2010, the company shut down its search engine after years of fighting government censorship and a cyberattack from within the country that targeted the email accounts of human rights activists. Google redirected mainland China web users to its uncensored site in Hong Kong and its search has been blocked in the country ever since, though it has maintained a low-profile presence there.

Consumers in China are also effectively blocked from the Google Play app store as paid apps and content are prohibited. While Google Play is pre-installed on the majority of the world's Android phones, it is markedly absent in China, which accounts for a third of all Android users.

Even in light of its difficulties there in the past, Google is hiring engineers in China in an effort to tap the local talent pool in the burgeoning world of artificial intelligence (AI).

Can Google find a way back into the market in China? Image source: Getty Images.

AI is H-O-T

AI is the hottest area of technology right now, with major tech companies competing for the limited number of scientists and engineers with experience in the field. Facebook, Inc. announced plans to open a research lab near the University of Montreal, which hosts a vibrant AI program, while Amazon.com is building a research and development center in Barcelona, Spain.

U.S. companies aren't the only ones searching the globe for AI talent. Chinese search leader Baidu, Inc.(NASDAQ:BIDU) has a 200-person AI lab in Silicon Valley, and earlier this year, internet giant Tencent Holdings Limited(NASDAQOTH:TCEHY) opened a facility in Seattle that would concentrate on speech recognition and natural language understanding.

Even the government in China is getting into the act, identifying AI as a key area of interest in its five-year plan and enlisting Baidu to develop a national laboratory dedicated to AI.

A ripe market

Google hosted an AI summit in the city of Wuzhen earlier this year, in conjunction with a historic match in which the company's DeepMind AlphaGo computer unseated the world champion in the ancient and complex Chinese game of Go. At both events, Google executives revealed that the company would hire engineers and scientists in the field of AI. The company has numerous positions listed in Beijing focused on the area of machine learning, a subdiscipline of AI. This would add to the more than 500 Google employees currently in Shanghai and Beijing.

There have long been reports of Google seeking to expand its presence in China, as the country has been the "one that got away." With a population of 1.37 billion and an estimated 591 million smartphone users, it represents both a rich opportunity and distinct challenge for Google.

Among the top app stores in the country, Google Play is in eighth place, behind Chinese favorites like Tencent and Baidu. Meanwhile, Google's cloud doesn't currently operate in China, and it would need to partner with a local company in order to comply with regulations that require that any data collected be stored on servers located within China.

Can Google turn things around?

Recent overtures including the AI summit, the historic Go match, and the hiring of local AI talent may signify an attempt by Google at thawing the chilly relations with China. AI systems require plentiful amounts of data in order to learn, and China's bountiful population provides a tempting target. Still, years of animosity and continuing government regulation will be a significant hurdle. I don't see Google marching triumphantly into China anytime soon.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares), Amazon, Baidu, and Facebook. The Motley Fool owns shares of and recommends Alphabet (A and C shares), Amazon, Baidu, and Facebook. The Motley Fool has a disclosure policy.

Author

Daniel W. Vena, CPA, CGMA is long-term investor searching for intangibles that provide explosive growth opportunities in his investments. He served on active duty with the US Army and has a Bachelors degree in accounting.
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